Pending home sales nationally slipped in November, but saw minor increases in the Northeast and the West, according to the National Association of Realtors (NAR).
Year-over-year, pending homes sales dropped 7.7 percent. However, lower sales mark no reason for major concern, according to NAR’s chief economist, who predicts solid growth for the long-term.
Affordability challenges in the West region are mostly to blame for the sales drop. Home prices in the West have risen too much and too fast, according to Lawrence Yun, the chief economist. “Land cost is expensive, and zoning regulations are too stringent,” he said. “Therefore, local officials should consider ways to boost local supply. If not, they risk seeing population migrating to neighboring states and away from the West Coast.”
Yun indicated the latest government shutdown will harm the housing market. “Unlike past government shutdowns, with this present closure, flood insurance is not available. That means that roughly 40,000 homes per month may go unsold because purchasing a home requires flood insurance in those affected areas,” Yun said. “The longer the shutdown means fewer homes sold and slower economic growth.”
Yun believes that longer-term prospects for home sales still remain strong. “Home sales in 2018 look to close out the year with 5.3 million home sales, which would be similar to that experienced in the year 2000.” Given that 17 million more jobs exist today compared to the turn of the century, home sales are clearly underperforming today. “That means there is steady longer-term growth potential.”